When the question asks for the rate of return that is required, how do we know when to use:
- Expenses / Investable assets. 2. PV = -X, FV = Y, PMT= Z, N= T; CPT I/Y
When the question asks for the rate of return that is required, how do we know when to use:
If there is a cash flows/ payments in or out of portfolio you need to do TMV to calculate PV or FV or use the terminal value as the FV if applicable. Otherwise if noted, then you can use the Investable asset base to account for immdediate CF or adjust next years’s required CF for inflation.
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#betterluckin2016
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if they ask for “next year’s required return” do the first 1
If they ask for the return that will acheive their long-term objective, use your calculator
Thanks Galli